How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2? most participants will choose 1B and 2C most participants will choose 1A most participants will choose 1B and 2D most participants will choose 1A and 2D 2) Which of the following can explain the behavior in the lab for decision 1? preference for certainty underestimation of large probabilities individuals are risk loving in the loss domain overweighting of small probabilities concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain
How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2? most participants will choose 1B and 2C most participants will choose 1A most participants will choose 1B and 2D most participants will choose 1A and 2D 2) Which of the following can explain the behavior in the lab for decision 1? preference for certainty underestimation of large probabilities individuals are risk loving in the loss domain overweighting of small probabilities concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section9.2: Elements Of Decision Analysis
Problem 2P
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Question
Imagine that you have the following pair of concurrent decisions. First examine both decisions, then indicate the options you prefer.
Decision 1: Choose between
A a sure loss of 1500
B a 75% to lose £2000 and 25% chance to lose nothing
Decision 2: Choose between
C a sure gain of £480
D a 25% chance to gain £2000 and 75% chance to gain nothing
How do you think respondents in a laboratory experiment would decide in Decision 1 and Decision 2?
most participants will choose 1B and 2C
most participants will choose 1A
most participants will choose 1B and 2D
most participants will choose 1A and 2D
2)
Which of the following can explain the behavior in the lab for decision 1?
preference for certainty
underestimation of large probabilities
individuals are risk loving in the loss domain
overweighting of small probabilities
concavity of the value function in the gain domain 2. individuals are risk loving in the loss domain
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